On May 16, 2014 the day the election results were announced the Sensex closed the day at 24,122 points. As we write exactly a year later on May 15, 2015, the Sensex is close to 27,100 points, notching gains around 15 per cent in the last one year.

It had been a one way street for the market until March, 2015, but, a few developments saw a 10 per cent fall since early March.

Expectations running too high, but disappointment remains

On March 5, 2014, the Sensex crossed an important landmark of 30,000 points only to slip 10 per cent since in 2 months. A few developments have not been too good for the markets.

The expectations and over exuberance of the markets has now been crushed with a 10 per cent fall since March 5, 2015. A number of reasons have been attributed. One, nothing seems to have improved on the ground. Corporate results are still very poor and many analysts have downgraded India's markets to under perform. The latest to do so is HSBC.

Earnings have been poor from IT companies and banks, especially the PSU banks. This has led to downgrades.

On the other hand there are various external factors which are also playing out. One is that a deluge of IPOs in China led a lot of Foreign Portfolio Investors (FPIs) to sell stocks in India and subscribe to IPOs there.

MAT issue

The second is that in some cases the government has not played smart. First, they made unfriendly statements on the Minimum Alternate Tax (MAT) issue which could have been handled with care, which pushed FPIs to sell Indian stocks. See a statement that could have been avoided by Arun Jaitley.

"FIIs went to a tribunal, which is called Authority for Advance Rulings (against levy of 20 per cent Minimum Alternate Tax on capital gains). They got a judgement against themselves.

"So, the tribunal has decided against them. The amount involved is Rs 40,000 crore. I can change the face of India's irrigation with that Rs 40,000 crore," he said.

A month after relentless selling by FPIs, the government mellowed down and set up a committee, "We have decided to refer this matter (of payment of MAT by FIIs) as well as few other tax issues, which are essentially legacy issues, to a committee headed by justice A P Shah, the chairman of the Law Commission, " Arun Jaitley said.

The entire thing would have been handled better. The damage was done and selling by FPIs bought down the market by 10 per cent.

What's in store ahead?

To be honest one cannot expect to get super returns from the markets. Perhaps, it would match the returns from a bank deposit. Indian markets are overpriced and everyone agrees on that. When we have a one year forward price to earnings multiple of 18 times for Sensex companies it is certainly expensive and ahead of the long term average.

The over exuberance has died down and markets are gradually turning more realistic. Nobody is talking of 35,000 points on the Sensex by Dec end.

All in all, if you are planning to invest, we would suggest wait for another 10 per cent fall on the Sensex for reasonable valuation and then buy. The long term story remains intact.

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